Irish government stands by brutal budget

Government stands firm against any indication of row-backs

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Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin meet the press last Wednesday

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Despite tension, and a report of a Cabinet walkout by Labour Party ministers, the government is adamant there will be no row-back on any aspect of the budget in the face of growing criticism from coalition backbenchers.

Minister for Communications Pat Rabbitte on Sunday ruled out any change to the cuts in child benefit and respite care announced last Wednesday.

When asked on RTE whether pressure from Fine Gael and Labour backbench TDs (members of Parliament) would force the government to revise its decision to cut the respite grant by €325, he replied, “No u-turn. I understand perfectly well how difficult some of the decisions are.”

Rabbitte’s declaration was supported by spokespersons for Taoiseach (Prime Minister) Enda Kenny and Tanaiste (Deputy Prime Minister) Eamon Gilmore, who confirmed that the two government leaders were determined no changes would be made.

There were fears if concessions were granted on any one issue everything would unravel.

The unity in government that there would be no u-turn came despite a week earlier when Gilmore led Labour ministers out of the cabinet room in the final stages of budget preparation, as reported in The Sunday Business Post.

It was the most serious breakdown in relations since the government was formed and threatened the very future of the coalition.

The split was over Labour opposition to a three percent across-the-board cut in social welfare payments demanded by Fine Gael in return for a three percent increase in the universal social charge (USC) for people on incomes of over €100,000.

The Labour ministers eventually returned to cabinet and Kenny and Gilmore had a two-hour private meeting. During their talk Gilmore agreed to drop Labour's demand for the USC hike, but only in return for a package of capital taxes and taxes on savings. These were introduced in the budget and allowed Labour leaders to claim that the tax package was aimed at the better off.

Still, many of the other tax measures in the budget hit the less well-off harder and this week the back-bench fallout from the events is continuing.

The budget, designed to save €3.5 million, was delivered for the first time by two ministers – Finance Minister Michael Noonan and Minister for Expenditure and Public Reform Brendan Howlin – in the Dail (Parliament) last week.

It added an extra €1 tax to every bottle of wine, 10 cent to a pint of beer and 10 cent to a packet of 20 cigarettes, and raised Deposit Interest Retention Tax (DIRT) by three percent to 33 percent.

It also introduced a €10 cut in child benefit from €140 to €130 a month, and introduced a new property tax of 0.18 percent for homes worth up to €1 million and 0.25 percent for homes worth more than that.

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